When economists troll: Germany should leave the Euro.

[DetlefK]

http://www.huffingtonpost.com/entry/economists-troll-germany-telling-it-to-leave-the-euro-first_55ad8ae2e4b0caf721b3ae92?

Why should the poor Eurozone-countries leave the Euro? Instead the rich Eurozone-countries like Germany and maybe Netherlands, Belgium, Austria and Finland should leave the Euro. The Euro would be severely weakened, allowing the fledgling economies to export cheaper (if they had something to export).
At the same time, the rich european-countries would have stronger currencies than the Euro and would be able to import cheaper (never mind that Germany is that rich by massive exports of technological products).

"A German exit from the euro would make German exports less competitive, but Princeton economist Ashoka Mody says that by depressing German consumer demand, Germany’s current trade surplus has been damaging to the world economy."

Step 1: Let's destroy the german economy to save the world economy.
Step 2: Germans should be poorer and must consume more.
What a magnificent plan.

"Ben Bernanke called for new eurozone rules against trade imbalances in order to force Germany to lower its trade surplus."

Sure. All we have to do is prevent Germany from selling products to foreign countries and force Germany to buy more foreign products.







This, Ladies and Gentlemen, is trolling at an expert-level AND getting paid to do it.

[rogerashton]

1. The economists have some very basic arithmetic on their side.

http://www.democraticunderground.com/?com=view_post&forum=1016&pid=127545

[DetlefK]

2. Okay, now YOU are trolling.

"If only Germany had imported more greek products, then Greece would be fine. Bad Germany!"

This is so utterly and mind-blowingly idiotic that I'm at a loss of words to describe how utterly and mind-blowingly idiotic this is.

What was Germany supposed to import from Greece?
Boats?
Olive-oil?
Fruits?
Should Germans have gone to vacation in Greece instead of wherever they feel like?
Maybe Germany sells €10,000,000 in cars to Greece and Greece sells €10,000,000 in olive-oil to Germany? Come on! What country doesn't want 5 million liters of olive-oil?

And let's not forget the best part of the plan: Let's destroy Germany's export-based economy to save Greece's import-based economy. Let's destroy 7% of the german GDP. Of course, selfish Germany would never stand for that.

Germany is bad, really bad, for giving Greece the products Greece asks for and for accepting the method of payment Greece proposes.

[unblock]

4. to dismiss the simple economics as trolling is facile.

germany leaving the euro may be a political non-starter, but from a economics perspective, it's just the flip side of the same coin.

economies as strong as germany's and as weak as greece's are incompatible in the same currency without substantial subsidies one way or another. it's not much different than how strong economies such as new york's can be in the same currency as mississippi's. federal dollars are distributed differently from how they're collected, and mississippi gains while new york loses. it works, but only because the strong state economies subsidize the weaker ones.

the euro doesn't have that mechanism, and thus is doomed to have exactly the kind of problems we see. if it wasn't greece it would be spain or portugal or italy.

you can make the naive, one-sided, puritanical, moralistic argument all day long that the debtor is 100% to blame and the lender is 0% at fault all day long, and sure, debtors shouldn't take on debt they can't pay, duh; but speaking as a finance expert, that view has long been abandoned by lenders and economists and financial analysts.

prudent lenders know and accept that they are taking risk when they lend, and understand that the fundamentals need to be there for debt repayment to be reasonably expected. the euro and the lending set up a situation where greece and other weak economies had huge incentives to do exactly what they did -- load up on cheap debt. when the great recession hit, they were in deep trouble, but eventually one crisis or another would have materialized regardless.

it was inherent in the structure of the euro, which hadn't contemplated this basic problem.

the german political solution appears to be to try to hammer all eurozone economies into uniformity. if only greece had the same export-producing capacity and saving rate and so on as germany, then all would be fine. from an economics perspective, that would work, i suppose, but it would require a tremendous amount of central political control, and the eurozone is not remotely set up for that.

[DetlefK]

5. As you said: political non-starter.

That's why no country, be it Greece or Germany, can be kicked out of the Eurozone for purely economic reasons: It would damage the political credibility of the european project.

Germany shouldn't have compromised when the Euro was founded. The government of Chancellor Kohl wanted strict and strong regulations for Eurozone-members to make sure the members are economically strong and stay economically strong. But France and Italy lowered the bars for Eurozone-membership and in the end Kohl agreed to a shaky Euro rather than saying No to the Euro.

And Greece even falsified the data it presented to the EU in 2000 when claiming to meet the criteria for the Euro. They didn't even meet the weakened criteria of economic stability. They didn't meet them by far.




To make the Euro sustainable, the EU needs more political power over its member-countries.
And who decides about the goals of this power? He who provides the money aka Germany?

[rogerashton]

6. So arithmetic is trolling?

You did not answer the arguments that I (and unblock) made, just reiterated your "moralistic" arguments. But economists have pointed to the unsustainability of mercantilism since before Adam Smith -- and the German position, like yours, is mercantilistic.

"Political nonstarter" just means that politics will not solve the problem. Greece will exit, and the pressure will shift to Spain. Spain will exit, and the pressure will shift to Italy and Portugal -- and tough, moralistic, nordic Finland, which is in recession because Nokia missed the Iphone boat and lumber is cheap. Eventually Germany and Austria will be alone in the Euro. That is what arithmetic tells me.

Can you refute arithmetic?

[DetlefK]

8. Arguments based on arithmetics alone are dangerous.

Purely judged by arithmetics, it would be best to execute disabled people instead of wasting ressources on their upbringing and sustainance, which they will never be able to repay to future generations.
Purely by arithmetics.

Purely by arithmetics, it would be best to eliminate all religious people in the world, because it would instantly remove religious wars and religious terrorism.
Purely by arithmetics.




Of course, it could be possible to kick the strongest Eurozone-members out of the Euro and have them found new currencies while the Euro gets downgraded to save the weakest economies.
Of course, it could be possible to kick the weakest Eurozone-members out of the Euro and have them found new, weak currencies that supposedly save them.
Of course, it could be possible to punish Germany's exports with taxes until Germany stops doing exports.

But what would be the consequences?

What would be the social consequences of executing disabled people? What would it mean for the abled?
What would be the political consequences of kicking countries out of the Eurozone?
What would be the consequences of sabotaging Germany's economy?

There is a company in Berlin. It produces a special kind of high-tech lab-equipment. Very delicate, custom-made by hand, produced in very small numbers and very expensive. This company exports all over the world. If you punish this company for exporting, it will threaten the company itself and it will threaten the scientists who want this equipment.
If you sabotage Germany's export of cars, how many people will lose their jobs?
If you sabotage Germany's GDP, how much will Germany be able to contribute to EU-efforts?
How much will Germany be WILLING to contribute to EU-efforts?
How will the EU look to the rest of the world when it adopts a policy that punishes success?




Those sandbox-scenarios are nice, but the economists can't even explain how economy works. And we should let them make political decisions all by themselves?

[rogerashton]

10. Arguments that contradict arithmetic are wrong. End of story. eom

[DetlefK]

12. As long as you don't mind ending up on the wrong end of an arithmetic...

You can always make an arithmetic argument how getting rid of these or those kinds of people would be the logical thing to do.

[rogerashton]

13. Detlef -- that's a German name, isn't it?

I never argued for exterminating people. You did. You tried to make the possibility of a numerical argument for eliminating people a reason to ignore arithmetic altogether. My argument was not that Grexit ought to happen, but that it will happen, because the arithmetic makes any alternative impossible.

By the way -- eliminating the German export surplus is not the same as killing people. Austerity, however, does kill people. So your attempt to associate my argument with an argument for killing is backward.

Auf Wiedersehen.

[DetlefK]

14. Nothing is impossible when politcians are involved.

No, you never talked about exterminating people. But I would like to point out that abstract mathematical reasoning can be used to justify next to anything in the real world because it leaves out data.

Another example: The US has by far the highest gun-death-rate in the civilized world. Math would suggest that outrage scales with the number of deaths. So, the more people die, the greater the call for a new approach to gun-violence until a tipping-point is reached and change is enacted.
Instead the US curbs research of gun-violence and the only applied solution is "more-of-the-same".
Curses upon you, mathematics! You have failed me!!!

Or:
The US is rapidly losing groundwater from the Midwest to the West-Coast, way faster than rainfall can replenish it. (And surface-water, e.g. rivers, sinks directly into the ground because there is no groundwater to keep it at the surface.) Calculations suggest severe damage to agriculture in that area, beginning 20 years from now. (The more realistic scenarios predict the death of agriculture in that region beginning 10 years from now.) The logical course of action would be for the farmers and the agri-business to enact new water-usage-policies that will enable them to continue operation for decades and centuries to come, albeit on a smaller scale.
Survival > Money.
It is inevitable.
It MUST be done.
The alternative is IMPOSSIBLE.
Instead, farmers-associations and agri-business are pressuring the state-governments to do nothing about the incoming economy-destroying catastrophe because it could upset the economy in the present. They are even trying to prevent research into how much water exactly is left and how long it will last.
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=6994202





It doesn't matter what logic says what should be done. We are not ruled by logical beings. We are ruled by fickle humans who get elected by hysterical humans. What will be done can not be guaranteed to be identical to what MUST be done. (The Grexit is not inevitable. It's no force of nature: Somebody will have to sign a document for the Grexit to happen. No signature, no Grexit. No matter whether a Grexit would be the better alternative.)

[rogerashton]

15. Wie sagt man auf Deutsch "goofy"?

Math would suggest that outrage scales with the number of deaths.

Why would math suggest that? Math hasn't failed you: you failed math!

It is inevitable.
It MUST be done.
The alternative is IMPOSSIBLE.

Right. And the farmers will be defeated by mathematics. Which exactly parallels my argument that the Euro will fail, regardless of politicians, defeated by mathematics.

Somebody will have to sign a document for the Grexit to happen.

Not really. If the Greeks just don't have Euros to spend, scrip will take their place, and Greece will be out of the Euro in practice. And any treaty can be unilaterally denounced by one of its signatories -- this is called "national sovereignty." If Syriza won't do it, and that seems to be the case, Golden Dawn will.

Now, I wasn't going to say this, but your hysterical mercantilistic babble has worn out my patience. Some time back you said

To make the Euro sustainable, the EU needs more political power over its member-countries.
And who decides about the goals of this power? He who provides the money aka Germany?

Let's see -- Europe united under German rule -- wasn't that the program of the NAZI party in the 1930's?

[closeupready]

7. Kohl grew up in post-apocalyptic Germany, and

understood how European unification was more important to the long-term survival of Germany than isolation. In his mind, a shaky Euro would ALWAYS be more important than NO Euro.

[Erich Bloodaxe BSN]

3. They're picking the bones of America, and need another rich country to strip.

There are only so many well-off countries with wealth not already concentrated exclusively in the hands of the rich. Germany is a tempting target.

[DFW]

9. Brilliant plan

Since Czech and Romanian-made cars are so much better built than German cars. I think I'll ditch my locally-made (I live in Germany) car and trade it in for a Dacia as soon as I get home.

[rogerashton]

11. By the way,

the German people don't benefit from the German export surplus. Basically, Germany is giving away seven percent of its GDP. What it gets in return are IOUs. The IOU's from Greece will never be repaid -- the more punitive the conditions Greece faces, the less Greece has to pay with. The downward spiral ends at zero repayment, which is what the German banks will get. But there is the key -- German banks. Even if the IOUs are repaid, the IOUs are not held by the German working class, nor by the proprietors of the mittelstand, nor by comfortable members of what Picketty calls the patrimonial middle class, with their pension funds -- they are held by the German 0.01 %. And, for that matter, by foreign holders of shares in German banks. So after Greece defaults, and then Spain defaults, and Portugal and Italy and Finland and Belgium default, the banks will have to be bailed out for their losses -- and who will pay for that? German taxpayers. So ordinary Germans pay twice for their export surplus: once with the low wages (relative to German productivity) that make the German exports cheap, and then a second time to bail out the banks that cannot balance an equation that simply mathematically, has no balance.